Two of Rhode Island’s three remaining medical malpractice insurers have requested rate increases, effective this fall, that would hike premiums by as much as 99.8 percent for different segments of the market, with nursing homes feeling the biggest impact.
ProSelect Insurance Co., which last year insured 507 doctors and other health care professionals, wants to raise their rates by 7 percent, and it wants to raise its hospital and medical facility rates by 16 percent, both starting Sept. 30.
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The Medical Malpractice Joint Underwriting Association of Rhode Island, the state’s insurer of last resort, is seeking a 99.8-percent hike, effective Oct. 1, for the four hospitals and 92 nursing homes it covers. Due to a recent experience rating plan change, the impact on hospitals’ premiums would actually be much lower, the MMJUA estimates – 9.3 to 13.25 percent – but nursing homes, which aren’t experience-rated, would take the full hit.
NORCAL Mutual Insurance Co., the state’s largest malpractice carrier, hasn’t filed for a rate hike yet this year, but it just raised its rates by 19 percent as of Jan. 1.
ProSelect raised its doctor and hospital rates much more dramatically last year than it’s seeking to do this year, by 15.05 and 38.66 percent, respectively. Including those hikes, in the last four years, doctors’ rates have jumped 74 percent, and hospitals’ have nearly tripled.
A report recently filed by ProSelect with the state Department of Business Regulation shows the company had a relatively good year, with only $315,000 paid out in indemnity, plus $35,555 in related costs. But the company also got 26 new claims, including 19 lawsuits.
To keep up with its expenses, ProSelect said in its rate filing, it needs to charge doctors 5.9 to 8.1 percent more, and hospitals, 15.4 to 17.7 percent more. The actual increases sought are roughly in the middle.
The MMJUA is in a very different position. During the 1990s, the company noted in its rate filing, commercial insurers lured away all its hospital clients with their “competitive rates.” Other hospitals set up their own captives.
The MMJUA still had plenty of nursing homes on its roster, but rate filings are very expensive – the DBR recently cited figures of $150,000 to $250,000 – so “with no major, institutional insureds,” the company “wasn’t in a position to undertake the effort and expense of making a filing.”
And so the MMJUA hasn’t raised its hospital rates since 1995. In the meantime, commercial carriers’ rates rose dramatically. Today, the MMJUA filing shows, its base or “manual” rate per acute-care bed, for example, is $2,208, but ProSelect’s is $4,611.
As NORCAL’s and ProSelect’s rates rose above the MMJUA’s, hospitals have come back to their old insurer. NORCAL has lost all its hospital clients; ProSelect still just Westerly and South County Hospitals. The MMJUA, meanwhile, has signed on St. Joseph’s Hospital, Roger Williams Medical Center, Women & Infants’ Hospital and Memorial Hospital of Rhode Island.
Immediately, MMJUA officials have said, they knew the 1995 rates would be inadequate. But they needed some time to build up new experience with hospitals, so they could credibly predict costs to set updated rates.
The first step the company took was to request a change in its experience rating system – from a “balanced” system in which rates were adjusted based on how each hospital’s risk quality compared to the others covered by the MMJUA, to a system like ProSelect’s, which determines how much more or less than the manual rates a hospital will need to pay to cover its expected losses.
The change had the potential to, by itself, raise the hospitals’ premiums by an average of 73 percent, by the attorney general’s calculations. In a compromise, the MMJUA agreed to cap the increase to 25 percent for three of them, and for Memorial, the latest to sign up with the company, to limit the adjustment to 19.8 percent as of July 1.
Because the experience adjustment is based on the manual rates, the newly requested rate hike would be offset, for the most part, by the experience rating change, the MMJUA told state regulators.
Nursing homes, on the other hand, will get the full hike, the MMJUA filing says, but they’re due. The company’s current rate per bed is $123 per year, the filing says, compared with the New Hampshire JUA’s $385 per year. Given how low the Rhode Island premiums are now, the MMJUA argued, “the actual dollar increase… should not be that significant.”
Nevertheless, company officials are clearly aware of the shock value of the 99.8-percent figure, and in a letter that is far more detailed and explanatory than anything ProSelect submitted, the MMJUA stressed that it just can’t avoid such a rate hike.
The legal climate alone has changed, the company noted: By law, the minimum damages for wrongful death now are $250,000, “the highest in the nation.” And overall, the company has gone through a rough patch. The “modest surpluses” it had built, the filing says, “evaporated” last year, leaving a $4-million deficit. In a separate filing, the MMJUA told the DBR it had paid almost $8.6 million in indemnity in 2004, and spent another $1.6 million on defense costs.
“The JUA knows that it is an integral part of the provision of health care in this State and is mindful of its obligation to try to offer affordable professional liability insurance coverage,” the rate hike request says. However, “the JUA cannot afford to run deficits and still provide the ‘competitive, stable market’ for malpractice… coverage that it is required to.”
Both companies’ rate requests are slated to be heard in mid-summer.
